Texting customers without proper consent is risky business. As we discussed here, there has been a flood of lawsuits over the past five years against companies large and small relating to their texting practices. With many new entrants to the cannabis space and many experienced plaintiff’s counsel keeping a watchful eye, we expect an increase in texting-related lawsuits to hit the cannabis industry in 2020.

But the news isn’t all ominous. One company, Xaler, was recently able to defeat class certification (the step by which a court allows a lawsuit to proceed on behalf of a class of customers) because the plaintiff did not adequately meet the numerosity requirement to proceed as a class.

Plaintiffs accused Xaler of sending unsolicited text messages despite their requests that the messages stop. Xaler responded that it only sent text message advertisements to customers who had consented to receive messages and that the messages included an option to text “STOP” in order to stop receiving the messages.

On a motion for class certification, plaintiffs sought to certify a class of all similarly-situated persons: in this case, all persons who received at least one text message using an automated dialing system from Xaler within a certain time period. Per the statute, a defendant could be liable for statutory damages in the amount of $500 for each proposed class member – leading to substantial liability if a class is certified.

To certify a class, a court must determine that the moving party has met all of the requirements for class treatment. These include: (i) the class must be so numerous that joinder of all members is impracticable, (ii) there must be questions or law or fact common to the class, (iii) the claims of the representative parties must be typical of the claims of the class, and (iv) the representative parties will fairly and adequately protect the interests of the class.

In a victory for Xaler, the court found that plaintiffs had failed to establish numerosity and thus denied the plaintiffs’ attempt to certify a class. Some courts have reasoned that numerosity is achieved when there are at least 40 class members. Others have concluded that no fixed number of class members is sufficient, and that the court must consider factors such as geographical distance or the nature of the action.

Plaintiffs argued that reviews for Xaler by hundreds of different customers on Weedmaps.com, a cannabis business directory website, were sufficient to show that at least a portion of those customers must have also received unsolicited text messages. Plaintiffs also submitted screenshots of seventy-eight customer reviews as evidence.

The court, however, noted that the reviews simply indicated that Xaler had 78 customers, at most. The reviews did not evidence that any of the customers who submitted reviews had received unwanted text messages, revoked consent to receive those message or continued to receive messages after the revocation. Indeed, the court found that speculation about class size is not enough to satisfy numerosity.

For cannabis industry defendants facing TCPA lawsuits, Xaler’s defense strategy on class certification may be worth repeating. Many cannabis companies are new to the marketplace – and may not have established customer lists or a long history of tracking customer purchases. It is not common to see class certification defeated on numerosity grounds when the defendant is a long-time established business with a certifiable list of customers and contracts. However, the Xaler decision could serve as an important model in a developing industry like cannabis.

About Our Practice Group

Kelley Drye has extensive experience navigating the rapidly-changing cannabis industry. We represent a multitude of stakeholders in the cannabis ecosystem, from growers and processors, manufacturers and retailers, to investors and financial organizations.